UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


SUPPLEMENT    TO    TREASURY    DECISIONS 

(T.    D.    2939) 


TREASURY  DEPARTMENT 
UNITED  STATES  INTERNAL  REVENUE 


v'l 

REGULATIONS  58 


RELATING  TO 


TAX  ON  THE  ISSUANCE  OF 
INSURANCE  POLICIES 


UNDER 


SECTIONS  503,  504,  OF  THE 
REVENUE  ACT  OF  1918 

(Public  No.  254,  65th  Cong.,  H.  R.  12863) 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1919 


s 

S'O 
\9\S 


a 


CONTENTS. 

IMPOSITION  OF  TAX. 

Article  Page. 

Section  503  of  the  Revenue  Act  of  1918 5 

1.  Use  of  terms 5 

2.  Effective  da,te 5 

3.  Premiums  on  policies  issued  prior  to  April  1,  1919 6 

4.  Basis  of  tax 6 

5.  Policies  issued  outside  of  the  United  States 0 

6.  When  insurance  issued  abroad  subject  to  stamp  tax 7 

7.  Residence  of  insured 7 

8.  Who  is  liable  for  the  tax 7 

LIFE  INSURANCE. 

Section  503  (a)  of  the  Revenue  Act  of  1918 7 

9 .  Computation  of  tax - 8 

10.  Insurance  issued  in  compliance  with  privilege  of  conversion 8 

11 .  Industrial  or  weekly  or  monthly  payment  plan 8 

12.  Group  life  insurance 8 

13.  Life,  health,  and  accident  insurance 9 

MARINE,  INLAND,  AND  FIRE  INSURANCE. 

Section  503  (b)  of  the  Revenue  Act  of  1918 9 

14.  Compulation  of  tax 9 

15.  Premium  charged 10 

1G.  Binders 10 

17.  Insurance  on  commodities  exported 10 

CASUALTY     INSURANCE. 

Section  503  (c)  of  the  Revenue  Act  of  1918 10 

18.  Scope  of  tax 11 

19.  Computation  of  tax 11 

20.  Industrial,  or  weekly  or  monthly  plan 11 

EXEMPTIONS. 

Section  503  (d)  of  the  Revenue  Act  of  1918 11 

21 .  Insurers  exempt  from  tax 11 

22.  Reinsurance 12 

23.  War  Risk  Insurance  Bureau 12 

RETURN  AND  PAYMENT  OF  TAX. 

Section  504  of  the  Revenue  Act  of  1918 12 

24 .  Monthly  returns 12 

25.  Date  when  due 12 

26.  Forms 13 

27.  Taxpayers'  records 13 

28.  Payment  of  tax 13 

127304°— 19  3 


4  CONTENTS. 

CREDITS  AND  REFUNDS. 

Article.  Page. 

Section  1310  (a)  of  the  Revenue  Act  op  191S 13 

29.  Credit  for  overpayment 13 

EXTENSION  OF  EXISTING  STATUTES. 

Section  1305  of  the  Revenue  Act  of  1918 14 

30.  Requiring  taxpayer  to  keep  records 14 

MEDIUM  OF  PAYMENT  OF  TAX. 

Section  1314  of  the  Revenue  Act  of  1918 15 

31 .  Payment  of  tax  by  uncertified  checks 15 

32 .  Procedure  with  respect  to  dishonored  checks 15 

PENALTIES. 

Sections  504,  1308,  1317  of  the  Revenue  Act  of  1918 15 

AUTHORITY  FOR  REGULATIONS. 

Section  1309  of  the  Revenue  Act  of  1918 16 

33.  Promulgation  of  Regulations 16 


TAX   ON   ISSUANCE  OF   INSURANCE  POLICIES. 

IMPOSITION   OF  TAX. 

Sec.  503.  That  from  and  after  April  1,  1919,  there  shall  be  levied,  assessed, 
collected,  and  paid,  in  lieu  of  the  taxes  imposed  by  section  504  of  the  Revenue 
Act  of  1917,  the  following  taxes  on  the  issuance  of  insurance  policies,  includ- 
ing, in  the  case  of  policies  issued  outside  the  United  States  (except  those 
taxable  under  subdivision  15  of  Schedule  A  of  Title  XI),  their  delivery 
within  the  United  States  by  any  agent  or  broker,  whether  acting  for  the 
insurer  or  the  insured;  such  taxes  to  be  paid  by  the  insurer,  or  by  such  agent 
or  broker. 

Article  1.  Use  of  terms. — When  used  in  these  regulations,  unless 
obviously  inapplicable,  the  term  "act"  means  the  Revenue  Act  of 
1918;  the  term  "person"  includes  partnerships,  corporations,  and 
associations,  as  well  as  individuals;  the  term  "insurer"  includes  any 
person,  partnership,  corporation,  or  association  transacting  the  busi- 
ness of  insuring  and  also  any  agent  or  broker;  the  term  "insurance" 
includes  all  manner  of  providing  indemnity  against  risk  upon  lives  or 
upon  property  of  any  description  (including  rents  and  profits), 
whether  against  peril  by  sea  or  inland  waters,  or  by  fire  or  lightning, 
or  other  peril;  the  term  "policy  of  insurance"  includes  any  instru- 
ment by  whatever  name  it  is  called  whereby  insurance  is  made  or 
renewed  or  whereby  obligations  of  the  nature  of  indemnity  for  loss, 
damage,  or  liability  are  assumed  by  the  insurer,  such  as  binders,  open 
policies,  covering  notes  or  policies;  the  term  "premium"  means  the 
agreed  price  for  assuming  and  carrying  the  risk  and  represents  all 
that  is  receivable  by  the  underwriter  therefor,  whether  in  one  sum 
or  in  installments  dming  the  life  of  the  policy;  the  term  "United 
States"  means  only  the  States,  Territories  of  Alaska  and  Hawaii,  and 
the  District  of  Columbia.     (See  Art.  5  for  definition  of  "delivery.") 

Art.  2.  Effective  date. — The  taxes  imposed  by  section  503  become 
effective  April  1,  1919.  All  taxes  under  this  section  are  in  lieu  of 
the  taxes  imposed  by  section  504  of  the  Revenue  Act  of  1917,  and 
attach  to  all  insurance  policies  issued  on  and  after  April  1,  1919,  and 
no  tax  will  be  asserted  under  any  prior  statute  on  any  policy  of 
insurance  issued  on  and  after  that  date,  except  that  in  the  case  of 
any  tax  imposed  by  any  similar  provision  of  the  Reveni  e  Act  of  1917, 
such  provision  shall  remain  in  force  until  April  1,  1919,  the  effective 
date  of  the  new  tax,  and  thereafter  for  the  collection  of  any  tax  or 
penalty  due  thereunder  and  unpaid. 

Art.  3.  Premiums  charged  on  policies  of  insurance  issued  prior  to 
April  1,  1919. — In  case  of  an  assessment  or  charge  in  the  nature  of  a 
premium,  whether  the  same  be  the  premium  originally  or  addi- 
tionally assessed  or  charged,  under  a  policy  of  insurance  issued  on  or 
after  November  1,  1917,  but  prior  to  April  1,  1919,  and  assessed  or 
charged  prior  to  the  latter  date  but  collected  subsequent  to  that  date, 

5 


G  TAX  ON   INSURANCE   POLICIES. 

it  shall  be  held  to  be  a  premium  that  accrued  prior  to  April  1,  1919, 
and  the  tax  shall  be  due  thereon  as  of  the  issuance  of  the  policy  of 
insurance  under  the  Revenue  Act  of  1917. 

Art.  4.  Basis  of  tax. — The  tax  is  upon  the  "issuance  of  insurance 
policies."  An  insurance  policy  is  issued  when  it  has  become  a  bind- 
ing and  effective  contract  against  the  insurer.  The  insurance  policy 
may  consist  of  any  contract  whereby  insurance  is  made  or  renewed 
or  whereby  obligations  of  the  nature  of  indemnity  for  loss,  damage, 
or  liability  are  assumed  by  the  insurer. 

Art.  5.  Policies  issued  outside  of  United  States. — The  tax  im- 
posed by  section  503  and  the  stamp  tax  imposed  by  subdivision 
15  of  Schedule  A  of  Title  XI  of  the  act  are  distinct  from  each  other, 
but  no  policy  is  subject  to  both  taxes.  Policies  issued  outside  of 
the  United  States,  but  not  subject  to  the  stamp  tax,  are  taxed  under 
section  503  of  the  act,  upon  their  delivery  within  the  United  States 
by  any  agent  or  broker,  whether  acting  for  the  insurer  or  the  insured. 
(See  art,  6  for  policies  subject  to  the  stamp  tax.)  Delivery  is  held 
to  mean  any  actual  or  physical  delivery  of  the  policy  of  insurance 
or  any  action  or  proceeding  which  is  sufficient  to  effect  a  bind- 
ing contract  whereby  insurance  is  made  or  renewed  or  whereby 
obligations  in  the  nature  of  indemnity  for  loss,  damage,  or  liability 
are  assumed.  It  is  not  essential  that  delivery  of  a  policy  be  made 
to  the  insured.  If,  by  agreement  or  understanding,  the  agent  of  the 
insurer  or  any  other  person  is  allowed  to  retain  the  policy  which  has 
been  issued,  such  holder  of  the  policy  will  be  regarded  as  holding 
the  same  for  the  insured  and  delivery  will  be  considered  as  complete. 

Subdivision  15  of  Schedule  A  of  TitleXI  of  the  Act  reads  as  follows: 

On  each  policy  of  insurance,  or  certificate,  binder,  covering  note,  memo- 
randum, cablegram,  letter,  or  other  instrument  by  whatever  name  called 
whereby  insurance  is  made  or  renewed  upon  property  within  the  United 
States  (including  rents  and  profits)  against  peril  by  sea  or  on  inland  waters  or 
in  transit  on  land  (including  transshipments  and  storage  at  termini  or  way 
points)  or  by  fire,  lightning,  tornado,  windstorm,  bombardment,  invasion, 
insurrection,  or  riot,  issued  to  or  for  or  in  the  name  of  a  domestic  corporation 
or  partnership  or  an  individual  resident  of  the  United  States  by  any  foreign 
corporation  or  partnership  or  any  individual  not  a  resident  of  the  United 
State.-,  wheal  such  policy  or  other  instrument  is  not  signed  or  countersigned 
by  an  officer  or  agent  of  the  insurer  in  a  State,  Territory,  or  district  of  the 
United  States  within  which  such  insurer  is  authorized  to  do  business,  a  tax 
of  3  cents  on  each  dollar,  or  fractional  part  thereof,  of  the  premium  charged: 
Provided,  That  policies  of  reinsurance  shall  be  exempt  from  the  tax  imposed 
by  this  subdivision. 

Art.  0.  When  insurance  issued  abroad  subject  to  stamp  tax. — 
Any  policy  or  other  instrument  whereby  insurance  is  made  or 
renewed  upon  property  within  the  United  States,  issued  by  any 
foreign  corporation  or  partnership  or  any  individual  not  a  resident 
of  the  United  States,  if  not  signed  or  countersigned  by  an  officer 
or  agent  of    the  insurer  in  the   State,  Territory,  or  district  of  the 


TAX   OX    INSURANCE    POLICIES.  7 

United  States  within  which  such  insurer  is  authorized  to  do  business, 
is  liable  to  the  stamp  tax  imposed  by  subdivision  15  of  Schedule  A 
of  Title  XI.  (See  art.  2.)  It  should  be  noted  that  the  stamp  tax 
applies  only  to  policies  of  insurance  upon  property  within  the  United 
States,  issued  to  or  for  or  in  the  name  of  a  domestic  corporation  or 
partnership  or  any  individual  not  a  resident  of  the  United  States,  and 
that  any  policy  in  the  nature  of  life  or  other  nonproperty  insurance  is 
taxable  under  the  provisions  of  section  503  of  the  act. 

Art.  7.  Residence  of  insured. — The  tax  is  imposed  upon  policies 
issued  within  the  United  States,  irrespective  of  the  residence  of  the 
insured  in  either  the  United  States  or  in  a  foreign  country. 

Art.  8.  Who  is  liable  for  the  tax. — The  insurer,  and  not  the  insured 
(or  broker  who  places  a  risk  for  a  client  with  an  insurer),  is  liable  for 
the  payment  of  the  tax;  but  in  the  case  of  policies  issued  outside  the 
United  States  (except  those  taxable  under  subdivision  15  of  Schedule 
A  of  Title  XI)  and  delivered  within  the  United  States  by  any  agent 
or  broker,  whether  acting  for  the  insurer  or  the  insured,  the  insurer, 
or  agent,  or  broker  is  liable  for  the  payment  of  the  tax.  See  article 
5  for  definition  of  "delivery."  Any  agent  or  broker  through  whom 
insurance  is  placed  with  a  foreign  insurance  company  becomes  liable 
to  the  tax  upon  the  making  of  the  contract  of  insurance,  whether 
notification  is  made  by  him  to  the  insured  or  by  the  foreign  insurance 
company  directly.  In  the  case  of  policies  taxable  under  subdivision 
15  of  Schedule  A  of  Title  XI,  both  the  insurer  or  agent  or  broker  and 
the  insured  are  responsible  to  the  Government  for  affixing  and  can- 
celing stamps  in  the  required  amount.      (See  Regulations  55,  art.  158.) 

LIFE   INSURANCE. 

(a)  Life  insurance:  A  tax  equivalent  to  8  cents  on  each  $100  or  fractional 
part  thereof  of  the  amount  for  which  any  life  is  insured  under  any  policy  of 
insurance,  or  other  instrument,  by  whatever  name  the  same  is  called: 
Provided,  That  on  all  policies  for  life  insurance  only  by  which  a  life  is 
insured  not  in  excess  of  $500,  issued  on  the  industrial  or  weekly  or  monthly 
payment  plan  of  insurance,  the  tax  shall  be  40  per  centum  of  the  amount 
of  the  first  weekly  premium  or  20  per  centum  of  the  amount  of  the  first 
monthly  premium  as  the  case  may  be:  Provided  further,  That  on  policies 
of  group  life  insurance,  covering  groups  of  not  less  than  25  lives  in  the  employ 
of  the  same  person,  for  the  benefit  of  persons  other  than  the  employer,  the  tax 
shall  be  equivalent  to  4  cents  on  each  $100  of  the  aggregate  amount  for  which 
the  group  policy  is  issued  and  of  any  net  increase  in  the  amount  of  the  insur- 
ance under  such  policy:  And  provided  further,  That  on  all  policies  cover- 
ing life,  health,  and  accident  insurance  combined  in  one  policy  by  which 
a  life  is  insured  not  in  excess  of  $500.  issued  on  the  industrial,  or  weekly  or 
monthly  payment  plan  of  insurance,  the  tux  shall  be  '10  per  centum  of  the 
amount  of  the  first  weekly  premium,  or  '_'<)  per  centum  of  the  amount  of  the 
first  monthly  premium,  as  the  case  may  be. 

Art.  9.  Computation  of  tax.— The  iax  is  equivalent  to  s  cents  on 
each  $100  or  fractional  part  thereof  of  the  amount  for  which  any 
life  is  insured  under  any  policy  of  insurance.      The  amount  for  which 


8  TAX   OX    INSURANCE   POLICIES. 

any  life  is  insured,  except  in  the  case  of  group  insurance,  is  {lie 
amount  to  be  paid  in  case  of  death  at  an;\  time  for  any  ordinary 
cause  regardless  of  special  contingencies. 

Airr.  10.  Insurance  issued  in  compliance  with  privilege  of  conver- 
sion. —A  certificate  or  other  instrument,  by  whatever  name  the  same 
is  called,  issued  to  a  policy  holder  evidencing  additional  insurance 
which  he  is  entitled  to  under  an  option  in  the  policy  of  insurance 
which  i-  taken  instead  of  a  cash  dividend  is  not  a  policy  of  insurance 
or  other  instrument  that  is  taxable  within  the  meaning  of  this  section. 

Art.  11.  Industrial  or  weekly  or  monthly  payment  plan.  -Life 
insurance  by  which  a  life  is  insured  not  in  excess  of  $500,  on  the 
industrial  or  weekly  or  monthly  payment  plan  of  insurance  is  taxable 
upon  the  issuance  of  policies  and  the  tax  is  measured  by  the  first 
weekly  or  monthly  premium  charged  on  all  such  policies  of  insurance 
and  is  40  per  centum  of  the  first  weekly  premium  or  20  per  centum 
of  the  first  monthly  premium,  as  the  case  may  be.  Where  the  policy 
upon  the  industrial  plan  of  payment  exceeds  $500  the  tax  is  8  cents 
on  each  1100  or  fractional  part  thereof  of  the  amount  for  which  the 
life  is  insured. 

Art.  12.  Group  life  insurance. — In  the  case  of  group  life  insurance, 
covering  groups  of  not  less  than  25  lives  in  the  employ  of  the  same 
person,  for  the  benefit  of  persons  other  than  the  employer,  the  tax  is 
imposed  upon  the  issuance  of  each  policy  of  insurance  and  is  measured 
by  the  aggregate  amount  for  which  the  group  policy  is  issued  and 
any  net  increase  in  the  amount  of  the  insurance  under  such  policy 
being  equivalent  to  4  cents  on  each  SI 00  thereof;  that  is  to  say,  the 
measure  of  tax  is.  first,  the  aggregate  amount  for  which  the  group 
policy  is  issued  and.  second,  any  net  increase  in  the  amount 
of  the  insurance  under  such  policy.  The  words  -net  increase" 
shall,  for  the  purposes  of  the  tax,  be  held  to  mean  any  subse- 
quent net  increase  in  the  amount  of  insurance  for  which  the  group 
policy  is  issued:  for  instance,  if  the  amount  for  which  the 
group  policy  is  issued  suffers  a  net  increase  in  the  amount  of  insur- 
ance covered  thereby,  the  sum  of  such  net  increase  and  the  amount 
for  which  the  policy  wTas  originally  issued  shall  be  the  basis  for  the 
purpose  of  measuring  the  tax  under  such  policy,  and  if  such  policy 
shall  again  suffer  a  net  increase  beyond  the  amount  lasl  established, 
such  new  net  increase  shall  be.  the  measure  of  additional  tax;  but  no 
refund  of  tax  will  he  allowed  for  any  decrease  from  any  net  increase 
of  the  amount  of  insurance  provided  for  under  such  a  policy  of 
insurance;  the  "amount  for  which  any  life  is  insured"  in  the  case  of 
group  insurance  i>  the  aggregate  amount  for  which  the  policy  is 
issued  whether  such  amount  be  named  in  the  policy  or  some  other 
instrument  having  reference  to  the  policy  or  supplemental  thereto. 

Akt.  13.  Life,  health,  and  accident  insurance.— In  the  case  of  life, 
health,  and  accident  insurance  combined  in  one  policy  by  which  a 


TAX   ()X    INSURANCE    POLICIES.  9 

life  is  insured  not  in  excess  of  $500,  on  the  industrial  or  weekly  or 
monthly  payment  plan  of  insurance,  the  tax:  is  imposed  upon  the 
issuance  of  all  policies  of  either  plan  and  is  measured  J>_\  the  first 
weekly  or  monthly  premium  charged  on  all  such  policies  of  insurance 
in  an  amount  equivalent  to  40  per  centum  of  the  amount  of  the  first 
weekly  premium  or  20  per  centum  of  the  amount  of  the  first  monthly 
premium,  as  the  case  may  be.  Combined  policies  of  life,  health,  and 
accident  insurance,  in  an  amount  in  excess  of  $500,  are  taxable  (a) 
as  separate  contracts  if  the  premium  charged  is  expressly  apportioned 
and  (b)  as  both  casualty  policies  and  life  policies  if  the  premium 
charged  is  greater  than  for  either  kind  of  insurance  separately  and 
is  not  apportioned. 

MARINE,  INLAND,  AND   FIRE   INSURANCE. 

(b)  Marine,  inland,  and  lire  insurance:  A  tax  equivalent  to  1  cent  on  each 
dollar  or  fractional  part  thereof  of  the  premium  charged  under  each  policy  of 
insurance  or  other  instrument  by  whatever  name  the  same  is  called  whereby 
insurance  is  made  or  renewed  upon  property  of  any  description  (including 
rents  or  profits),  whether  against  peril  by  sea  or  inland  waters,  or  by  fire  or 
lightning,  or  other  peril; 

Art.  14.  Computation  of  tax. — In  the  case  of  marine,  inland,  and 
fire  insurance  the  tax  is  imposed  upon  the  issuance  of  each  policy  of 
insurance  and  is  measured  by  the  premium  charged  under  each 
policy  of  insurance,  and  is  equivalent  to  1  cent  on  each  SI  or  frac- 
tional part  thereof  of  the  premium  charged,  and  of  any  additional 
assessment  or  charge  in  the  nature  of  a  premium  upon  insurance 
made  or  renewed;  for  example,  upon  a  premium  charge  of  $10.10 
the  tax  imposed  is  11  cents,  being  1  cent  for  each  dollar  and  1  cent 
for  the  fractional  part  of  a  dollar.  The  tax  attaches  to  the  full 
amount  of  the  premium  charged  even  though  at  a  later  date  a  por- 
tion of  the  amount  may  be  returned  to  the  insured  as  a  dividend 
or  other  net  saving  of  premium.  A  note  given  to  a  mutual  insur- 
ance company  to  cover  the  maximum  liability  of  the  insured,  not  in 
payment  of  premiums  or  assessments  but  as  a  form  of  security  for 
the  payment  of  assessments  as  they  are-  made,  the  exact  amount  of 
the  premium  to  carry  the  insurance  n»t  being  definitely  known, 
should  not  be  the  basis  of  assessment  of  the  tax,  but  the  tax  should 
in  such  a  case  be  computed  upon  the  amount  of  the  assessments  as 
they  are  made.  Where  mutual  or  cooperative  companies  require 
from  policyholders  upon  the  issuance  of  policies  (a)  so-called  pre- 
mium deposits  hugely  in  excess  of  the  estimated  cost  of  the  insurance 
and  refund  the  excess  over  the  actual  cost  upon  the  expiration  of 
the  policy  of  insurance,  or  (5)  notes  evidencing  the  estimate  of  the 
policyholder's  liability  and  also  a  cash  percentage  of  the  notes  repre- 
senting as  nearly  as  may  be  the  cost  of  the  insurance,  the  tax  should 
originally  be  paid  upon  the  estimated  premium  on  each  policy  com- 


10  TAX    ON    [INSURANCE   POLICIES. 

puted  on  an  experience  basis  subject  to  final  adjustment  of  the  tax 
by  debit  or  credit,  as  the  case  may  be,  in  the  return  for  the  month 
when  the  premium  is  determined. 

Art.  15.  Premium  charged. — The  premium  charged  is  the  total 
premium  payable  during  the  life  of  the  contract  of  insurance  and 
includes  any  additional  assessments  or  charges  in  the  nature  of  a 
premium  which  may  be  assessed  or  charged  during  the  life  of  the  con- 
tract of  insurance  whether  payable  in  one  sum  or  installments,  and 
however  paid. 

Art.  1(3.  Binders. — On  binders  or  other  instruments  issued  with- 
out a  definite  agreement  as  to  the  premium  to  be  charged  the  tax 
attaches  when  the  amount  of  the  premium  is  determined.  If  the 
premium  is  charged  at  the  time  the  binder  is  issued  the  tax  imme- 
diately attaches;  and  if  the  binder  is  divided  into  a  number  of  differ- 
ent policies,  issued  by  separate  insurers  as  direct  insurance,  each 
insurer  must  make  return  with  respect  to  the  proportion  of  the 
premium  charged  by  it. 

Art.  17.  Insurance  on  commodities  exported. — No  tax  is  imposed 
upon  the  premium  charged  for  insurance  issued  to  cover  commodi- 
ties which  are  in  the  actual  process  of  exportation  and  which  have 
begun  their  voyage  or  preparation  for  the  voyage  from  the  United 
States.  If  a  policy  of  insurance  or  other  instrument  is  issued  cover- 
ing both  export  and  nonexport  property,  the  tax  will  be  computed 
upon  the  full  amount  of  the  premium  charged,  unless  such  instru- 
ment clearly  indicates  the  property  for  export  and  the  premium  charged 
for  the  insurance  thereon. 

CASUALTY   INSURANCE. 

(c)  Casualty  insurance:  A  tax  equivalent  to  1  cent  on  each  dollar  or  frac- 
tional part  thereof  of  the  premium  charged  under  each  policy  of  insurance  or 
obligation  of  the  nature  of  indemnity  for  loss,  damage,  or  liability  (except 
bonds  and  policies  taxable  under  subdivision  2  of  schedule  A  of  Title  XI) 
issued  or  executed  or  renewed  by  any  person  transacting  the  business  of  em- 
ployer's liability,  workmen's  compensation,  accident,  health,  tornado, 
plate  glass,  steam  boiler,  elevator,  burglary,  automatic  sprinkler,  automo- 
bile, or  other  branch  of  insurance  (except  life  insurance,  and  insurance 
described  and  taxed  in  the  preceding  subdivision):  Provided,  That  in 
case  of  policies  of  insurance  issued  on  the  industrial  or  weekly  or  monthly 
payment  plan  the  tax  shall  be  40  per  centum  of  the  amount  of  the  first 
weekly  premium  or  20  per  centum  of  the  amount  of  the  first  monthly  pre- 
mium, as  the  case  may  be; 

Art.  IS.  Scope  of  tax. — For  the  purpose  of  the  tax  casualty  insur- 
ance includes  every  policy  of  insurance  or  obligation  of  the  nature  of 
indemnity  for  loss,  damage,  or  liability  issued  or  executed  or  renewed 
by  any  person  transacting  any  kind  of  insurance  except  life  insurance 
and  insurance  described  and  taxed  in  the  preceding  subdivision,  and 
except  bonds  and  policies  taxable  under  subdivision  (2)  of  schedule 


TAX   ON"  INSURANCE   POLICIES.  11 

A  of  Title  XL     The  subdivision  (2)  of  schedule  A  referred  to  reads 

as  follows : 

Bonds,  indemnity  and  surety:  On  all  bonds  executed  for  indemnifying  any 
person  who  shall  have  become  bound  or  engaged  as  surety,  and  on  all  bonds 
executed  for  the  due  execution  or  performance  of  any  contract,  obligation,  or 
requirement,  or  the  duties  of  any  office  or  position,  and  to  account  for  money 
received  by  virtue  thereof,  and  on  all  policies  of  guaranty  and  fidelity  in- 
surance, including  policies  guaranteeing  titles  to  real  estate  and  mortgage 
guarantee  policies,  and  on  all  other  bonds  of  any  description,  made,  issued,  or 
executed,  not  otherwise  provided  for  in  this  schedule,  except  such  as  may  be 
required  in  legal  proceedings,  50  cents:  Provided,  That  where  a  premium  is 
charged  for  the  issuance,  execution,  renewal  or  continuance  of  such  bond  the 
tax  shall  be  1  cent  on  each  dollar  or  fractional  part  thereof  of  the  premium 
charged:  Provided  further,  That  policies  of  reinsurance  shall  be  exempt  from 
the  tax  imposed  by  this  subdivision. 

See  Regulations  55  regarding  stamp  taxes  imposed  by  Title  XI. 

Art.  19.  Computation  of  tax. — In  the  case  of  policies  issued  under 
paragraph  (c)  the  tax  imposed  upon  the  issuance  of  each  policy  of 
insurance  is  measured  by  the  premium  charged  and  is  equivalent  to 
1  cent  on  each  dollar  or  fractional  part  thereof  of  the  premium  charged 
or  of  any  additional  assessment  or  premium  charge  upon  any  policy 
of  insurance. 

Art.  20.  Industrial  or  weekly  or  monthly  payment  plan. — In  the 

case  of  casualty  insurance  on  the  industrial  or  weekly  or  monthly 

payment  plan,  the  tax  is  imposed  upon  the  issuance  of  all  policies 

under  either  plan  and  is  measured  by  the  first  weekly  or  monthly 

premium  charged   on  all  such  policies  of  insurance  in  an   amount 

equivalent  to  40  per  centum  of  the  amount  of  the  first  w  cekly  premium, 

or  20  per  centum  of  the  amount  of  the  first  monthly  premium,  as  the 

case  may  be. 

EXEMPTIONS. 

i(/i  Policies  issued  by  any  corporation  enumerated  in  section  231,  and 
policies  of  reinsurance,  shall  be  exempt  from  the  taxes  imposed  by  this 

section. 

Art.  21.  Insurers  exempt  from  tax. — Insurers  exempt  from  income 
tax  under  section  231  of  the  act  are  also  exempt  from  the  payment  of 
the  excise  tax  upon  the  issuance  of  insurance  policies  imposed  by  sec- 
tion 503.  Policies  of  insurance  issued  by  farmers'  or  other  mutual 
hail,  cyclone,  or  fire  insurance  companies  or  like  organization  of  purely 
local  character,  the  income  of  which  consists  solely  of  assessments, 
dues  and  fees  collected  from  members  for  the  *ole  purpose  of  meeting 
expense^  are  not  subject  to  the  excise  tax.  Where  a  farmers'  or  other 
mutual ,  hail,  cyclone,  fire,  or  other  insurance  company  is  not  of  a  purely 
local  character  or  has  income  from  investments  in  bonds,  mortgages, 
etc.,  it  is  not  exempt  from  income  tax  and  accordingly  is  not  exempt 
from  the  excise  tax  imposed  by  section  503.  A  fraternal  beneficiary 
society,  order,  or  association  operating  under  the  lodge  system  or  for 
the  exclusive  benefit  of  the  members  of  a  fraternity  itself  operating 


12  TAX    >)X    INSURANCE   POLICIES. 

under  the  lodge  system  and  providing  for  the  payment  of  life,  sick, 
accident,  or  other  benefits  to  the  members  of  such  society,  order,  or 
association  or  their  dependents  is  exempt  from  income  tax  and  also 
from  the  excise  tax. 

Art.  22.  Reinsurance. — The  tax  does  not  attach  on  amounts 
charged  as  premiums  on  policies  of  reinsurance.  When  an  insurer 
reinsures  the  risk  of  another  insurer  the  transaction  is. termed  rein- 
surance and  is  not  taxable. 

Art.  23.  War  Risk  Insurance  Bureau. — The  tax  imposed  by  sec- 
tion 503  of  the  act  does  not  apply  to  soldiers'  and  sailors'  insurance 
written  by  the  War  Risk  Insurance  Bureau. 

RETURN   AND   PAYMENT   OF  TAX. 

Sec.  504.  That  every  person  issuing  policies  of  insurance  upon  the  issuance 
of  which  a  tax  is  imposed  by  section  503  shall  make  monthly  returns  under 
oath,  in  duplicate,  and  pay  such  tax  to  the  collector  of  the  district  in  which 
the  principal  office  or  place  of  business  of  such  person  is  located.  Such 
returns  shall  contain  such  information  and  be  made  at  such  times  and  in 
such  manner  as  the  Commissioner,  with  the  approval  of  the  Secretary,  may 
by  regulation  prescribe. 

The  tax  shall,  without  assessment  by  the  Commissioner  or  notice  from  the 
collector,  be  due  and  payable  to  the  collector  at  the  time  so  fixed  for  filing 
the  return.  If  the  tax  is  not  paid  when  due,  there  shall  be  added  as  part  of 
the  tax  a  penalty  of  5  per  centum,  together  with  interest  at  the  rate  of  1  per 
centum  for  each  full  month,  from  the  time  when  the  tax  became  due. 

Sec.  L309.  That  the  Commissioner,  witli  the  approval  of  the  Secretary, 

may  by  regulation  provide  that  any  return  required  by  Titles  V 

to  be  under  oath  may,  if  the  amount  of  the  tax  covered  thereby  is 

not  in  exces  of  $10,  be  signed  or  acknowledged  before  two  witnesses  instead 

of  under  oath. 

Art.  24.  Monthly  returns. — Any  insurer,  agent,  or  broker,  liable 
for  the  tax  imposed  by  section  503  of  the  act  must  make  return 
each  month,  and  under  oath  (unless  the  amount  of  the  tax  covered 
thereby  is  not  in  excess  of  $10,  in  which  case  the  return  may  be  signed 
or  acknowledged  before  two  witnesses  instead  of  under  oath),  to 
the  collector  of  internal  revenue  for  the  district  in  which  the  prin- 
cipal place  of  business  of  said  insurer,  agent,  or  broker  is  located; 
except  that  in  the  case  of  insurers  having  more  than  one  depart- 
ment and  located  in  different  collection  districts  each  department 
will  be  permitted  to  make  return  for  the  business  transacted  by  it 
to  the  collector  of  the  district  in  which  the  department  is  located; 
but  it  is  desirable  to  prevent  multiplicity  of  reports  so  far  as  possible. 

Art.  25.  Date  when  due. — The  amount  of  tax  is  to  be  computed 
upon  the  premiums  charged  under  each  policy,  the  reports  of  which 
were  received  by  the  insurer  at  its  principal  place  of  business  (or  at 
the  place  of  business  of  the  department  of  the  insurer  making  a 
separate  return  to  the  collector  for  the  district  wherein  such  depart- 
ment is  located),  during  the  month  for  which  the  return  is  made; 
and  the  return  for  each  month  is  to  be  rendered  and  the  tax  paid  on 


TAX  ON   INSURANCE  POLICIES.  13 

or  before  the  last  day  of  the  succeeding  month  covering  taxes  accru- 
ing during  the  preceding  month.  It  is  not  necessary  to  delay  a  return 
until  all  the  policies  issued  during  the  month  have  been  entered  upon 
the  books  of  the  insurer,  but  the  insurer's  records  should  disclose 
policies  reported  whereon  premiums  have  been  charged  to  the  last 
day  of  the  month  for  which  the  return  is  made. 

Art.  26.  Forms. — The  return  is  to  be  made  on  Form  730  (revised) 
and  blank  forms  for  making  return  may  be  had  upon  application 
to  the  commissioner  or  to  the  collector  of  internal  revenue  of  any 
district. 

Art.  27.  Taxpayer's  records. — Only  the  gross  tax  returnable,  the 
total  credits,  and  the  net  amount  of  tax  payable  should  be  entered 
in  the  return.  It  is  not  necessary  to  show  the  name  and  address  of 
each  person  to  whom  a  policy  is  issued,  nor  is  it  necessary  to  submit 
a  list  of  all  cancellations,  returned  premiums,  or  overpayments  for 
which  credit  is  claimed  on  the  return;  but  each  insurer  must  keep 
his  records  and  accounts  in  such  manner  as  to  afford  an  easy  method 
of  examination  and  verification  of  the  correctness  of  each  return 
as  made. 

Art.  28.  Payment  of  tax. — The  remittance  of  the  amount  of  the 
tax  must  accompany  the  return  as  and  when  made. 

CREDITS   AND  REFUNDS. 

Sec.  1310.  (a)  That  in  the  case  of  any  overpayment  or  overcollection  of  any 
tax  imposed  by  section  G2S  or  G30or  by  Title  V,  Title  VIII,  or  Title  IX,  the 
person  making  such  overpayment  or  overcollection  may  take  credit  there- 
for against  taxes  due  upon  any  monthly  return,  and  shall  make  refund  of  any 
excessive  amount  collected  by  him  upon  proper  application  by  the  person 
entitled  thereto. 

Art.  29.  Credit  for  overpayment. — A  taxpayer  may  take  credit  in 
a  subsequent  month's  return  for  any  overpayment  of  tax  for  a 
prior  month.  Where  a  policy  has  been  issued  upon  which  there  was 
charged  an  amount  of  premium  which  is  afterwards  determined  to 
have  been  incorrect,  and  refund  is  made  of  the  amount  of  the  excess 
premium  paid',  the  taxpayer  may  deduct  from  the  tax  return  of  a 
subsequent  month  the  amount  of  tax  previously  paid  upon  the  por- 
tion of  the  premium  so  returned.  Where  a  policy  of  insurance  has 
been  issued  and  tax  paid  upon  the  premium  charged  and  such  policy 
is,  according  to  law  or  the  term  of  the  contract  of  insurance,  after- 
wards canceled  and  the  unearned  portion  of  the  premium  charged 
is  returned  to  the  insured,  the  taxpayer  may  deduct  from  the  tax 
return  of  a  subsequent  month  the  amount  of  tax  previously  paid 
upon  the  portion  of  the  premium  so  returned.  If  a  policy  of  insur- 
ance issued  prior  to  April  1,  1919,  and  thus  taxed  under  section  504 
of  the  Revenue  Act  of  1917  is  canceled  on  or  after  that  date,  credit 


14  TAX   ON   INSURANCE   POLICIES. 

may  be  taken  in  the  same  manner  as  though  the  policy  of  insurance 
had  been  issued  on  or  after  April  1,  1919.  But  any  other  claim  for 
refund  of  tax  paid  under  the  1917  Act  will  continue  to  be  made  on 
Form  46.  In  case  an  error  or  omission  is  discovered  in  any  prior 
month's  return,  the  amount  of  the  tax  found  to  be  due  because  of 
such  error  or  omission  shall  be  included  in  the  return  for  the  month 
in  which  the  discovery  of  error  or  omission  is  made.  Reinsurance 
premiums  are  not  subject  to  the  tax,  and  return  payment  premiums 
or  cancellations  on  same  are  not  to  be  considered  as  credits. 

EXTENSION   OF  EXISTING   STATUTES. 

Subdivision  (b)  of  Section  1400  of  Title  XIV. — General  Provisions 
of  the  Act  reads  as  follows: 

Sec.  1400  (b).  Such  parts  of  Acts  shall  remain  in  force  for  the  assessment 
and  collection  of  all  taxes  which  have  accrued  thereunder,  and  for  the  impo- 
sition and  collection  of  all  penalties  or  forfeitures  which  have  accrued  and 
may  accrue  in  relation  to  any  such  taxes    *    *    *. 

*  In  the  case  of  any  tax  imposed  by  any  part  of  an  Act  herein 
repealed,  if  there  is  a  tax  imposed  by  this  Act  in  lieu  thereof,  the  provision 
imposing  such  tax  shall  remain  in  force  until  the  corresponding  tax  under 
this  Act  takes  effect  under  the  provisions  of  this  Act. 

Sec.  1305.  That  all  administrative,  special,  or  stamp  provisions  of  law, 
including  the  law  relating  to  the  assessment  of  taxes,  so  far  as  applicable, 
are  hereby  extended  to  and  made  a  part  of  this  Act,  and  every  person  liable 
to  any  tax  imposed  by  this  act,  or  for  the  collection  thereof,  shall  keep  such 
records  and  render,  under  oath,  such  statements  and  returns,  and  shall  comply 
with  such  regidations  as  the  Commissioner,  with  the  approval  of  the  Secre- 
tary, may  from  time  to  time  prescribe. 

Whenever  in  the  judgment  of  the  Commissioner  necessary  he  may  re- 
quire any  person,  by  notice  served  upon  him,  to  make  a  return  or  such  state- 
ments as  he  deems  sufficient  to  show  whether  or  not  such  person  is  liable 
to  tax. 

The  Commissioner,  for  the  purpose  of  ascertaining  the  correctness  of  any 
return  or  for  the  purpose  of  making  a  return  where  none  has  been  made, 
is  hereby  authorized,  by  any  revenue  agent  or  inspector  designated  by  him 
for  that  purpose,  to  examine  any  books,  papers,  records  or  memoranda 
bearing  upon  the  matters  required  to  be  included  in  the  return,  and  may 
require  the  attendance  of  the  person  rendering  the  return  or  o'f  any  officer 
or  employee  of  such  person,  or  the  attendance  of  any  other  person  having 
knowledge  in  the  premises,  and  may  take  his  testimony  with  reference  to 
the  matter  required  by  law  to  be  included  in  such  return,  with  power  to 
administer  oaths  to  such  person  or  persons. 

Art.  30.  Requiring  taxpayer  to  keep  records,  etc. — In  collecting 
the  tax  the  commissioner  has  the  benefit  of  all  existing  internal- 
revenue  laws.  In  aid  of  the  enforcement  of  the  statute  the  com- 
missioner may  require  any  person  subject  to  the  tax  to  keep  specified 
records,  to  render  returns  and  statements  as  directed,  to  submit 
himself  and  his  books  to  examination,  and  to  comply  with  such  regu- 
lations as  may  he  prescribed. 


TAX   ON   INSURANCE    POLICIES.  15 

MEDIUM   OF   PAYMENT   OF   TAX. 

Sec.  1314.  That  collectors  may  receive,  at  par  with  an  adjustmenl  for 
accrued  interest,  certificates  of  indebtedness  issued  by  the  United  States  and 
uncertified  checks  in  payment  of  income,  war-profits  and  excess-profits 
taxes  and  any  other  taxes  payable  other  than  by  stamp,  during  such  time 
and  under  such  regulations  as  the  Commissioner,  with  the  approval  of  the 
Secretary,  shall  prescribe;  but  if  a  check  so  received  is  not  paid  by  the 
bank  on  which  it  is  drawn  the  person  by  whom  such  check  has  been  tendered 
shall  remain  liable  for  the  payment  of  the  tax  and  for  all  legal  penalties  and 
additions  the  same  as  if  such  check  had  not  been  tendered. 

Art.  31.  Payment  of  tax  by  uncertified  checks.— Collectors  may- 
accept  uncertified  checks  in  payment  of  taxes,  provided  such  checks 
are  collectible  at  par;  that  is,  for  their  full  amount  without  any 
deduction  for  exchange  or  other  charges.  The  collector  will  stamp 
on  the  face  of  each  check  before  deposit  the  words  "This  check  is 
in  payment  of  an  obligation  to  the  United  States  and  must  be  paid 
at  par,  no  protest."  with  his  name  and  title.  The  day  on  which 
the  collector  receives  the  check  will  be  considered  the  date  of  pay- 
ment so  far  as  the  taxpayer  is  concerned,  unless  the  check  is  returned 
dishonored,  if  one  check  is  remitted  to  cover  two  or  more1  persons' 
taxes,  the  remittance  must  be  accompanied  by  a  letter  of  transmittal 
stating  (a)  the  name  of  the  drawer  of  the  check:  (b)  the  amount 
of  the  check:  (c)  the  amount  of  any  cash,  money  order,  or  other 
instrument  included  in  the  same  letter  of  transmittal:  id)  the  name 
of  each  person  whose  tax  is  to  be  paid  by  the  remittance;  (<  \  the 
amount  of  the  payment  on  account  of  each  person;  and  (/)  the  kind 
of  tax  paid. 

Abt.    o2.   Procedure    with    respect    to    dishonored    checks.      II'    the 

bank  on    which   any  such   check  is   drawn  should    refuse    to   pay   it 

at    par,  the  check  should  be  returned  through   the  depositary   bank 

and  be  treated  in  the  same  manner  as  a  bad  check.     All  expenses 

incident   to   the  attempt    to  collect  such   a  check  and    the  return  of 

it  through   the  depositary  bank  must  be  paid  by  the  drawer  of  the 

check  to  the  bank  on  which  it  is  drawn,  since  no  deduction  can  be 

made  from  amounts  received  in  payment  of  taxes.     See  section  ;>2l<) 

of    the   revised  statutes.     If    any   taxpayer  whose    check    has    been 

returned  uncollected  by  the  depositary  bank  should  fail  at  once  i«> 

make   the  check  good,   the  collector  should   proceed    to  collect    the 

tax  as  though  no  check  had  been  given.     A  taxpayer  who  tenders 

a  certified  check  in  payment  for  taxes  is  also  not  released  from  his 

obligation   until    the  check   lias   been  paid.      See  chapter    Mil    of   the 

aft  of  March  2.  L911. 

PENALTIES. 

Sec. 504.  *  *  *  Thetaxshall,  without  assessment  by  the  Commissioner 
or  notice  from  the  collector,  be  due  and  payable  to  the  collector  a1  the  time 
so  fixed  for  filing  the  return.  If  the  tax  is  not  paid  when  due.  i  here  shall  be 
added  as  part  of  the  tax  a  penalty  of  5  pet  centum,  fcogetherwith  interesl  a1  the 
rale  of  1  per  centum,  for  each  full  month,  from  the  time  when  the  tax  became 
du<\ 


16  TAX   ON   INSURANCE   POLICIES. 

Section  3176  of  the  United   States  Revised  Statutes,  as  amended 

by  section  1317  of  the  Revenue  Act  of  1918. 

*  In  case  of  any  failure  to  make  and  file  a  return  or  list  within  the 
time  prescribed  by  law,  or  prescribed  by  the  Commissioner  of  Internal 
Revenue  or  the  collector  in  pursuance  of  law,  the  Commissioner  of  Internal 
Revenue  shall  add  to  the  tax  25  per  centum  of  its  amount,  except  that  when 
a  return  is  filed  after  such  time  and  it  is  shown  that  the  failure  to  file  it  was 
due  to  a  reasonable  cause  and  not  to  willful  neglect,  no  such  addition  shall 
be  made  to  the  tax.  In  case  a  false  or  fraudulent  return  or  list  is  willfully 
made,  the  Commissioner  of  Internal  Revenue  shall  add  -to  the  tax  50  per 
centum  of  its  amount. 

The  amount.  60  added  to  any  tax  shall  be  collected  at  the  same  time  and  in 
the  same  manner  and  as  part  of  the  tax  unless  the  tax  has  been  paid  before 
the  discovery  of  the  neglect,  falsity,  or  fraud,  in  which  case  the  amount  so 
added  shall  be  collected  in  the  same  manner  as  the  tax. 

Sec  1308.  (a)  That  any  person  required  under  Titles  V,  VI,  VII,  VIII, 
IX,  X,  or  XII,  to  pay,  or  to  collect,  account  for  and  pay  over  any  tax,  or 
required  by  law  or  regulations  made  under  authority  thereof  to  make  a 
return  or  supply  any  information  for  the  purpose  of  the  computation,  assess- 
ment or  collection  of  any  such  tax,  who  fails  to  pay,  collect,  or  truly  account 
for  and  pay  over  any  such  tax,  make  any  such  return  or  supply  any  such 
information  at  the  time  or  times  required  by  law  or  regulation  shall  in  addi- 
tion to  other  penalties  provided  by  law  be  subject  to  a  penalty  of  not  more 
than  $1,000. 

(b)  Any  person  who  willfully  refuses  to  pay,  collect,  or  truly  account  for 
and  pay  over  any  such  tax,  make  such  return  or  supply  such  information  at 
the  time  or  times  required  by  law  or  regulation,  or  who  willfully  attempts  in  an 
any  manner  to  evade  such  tax  shall  be  guilty  of  a  misdemeanor  and  in  addi- 
tion to  other  penalties  provided  by  law  shall  be  fined  not  more  than  $10,000 
or  imprisoned  for  not  more  than  one  year,  or  both,  together  with  the  costs 
of  prosecution. 

(c)  Any  person  who  willfully  refuses  to  pay,  collect,  or  truly  account  for 
and  pay  over  any  such  tax  shall  in  addition  to  other  penalties  provided  by 
law  be  liable  to  a  penalty  of  the  amount  of  the  tax  evaded,  or  not  paid,  col- 
lected, or  accounted  for  and  paid  over,  to  be  assessed  and  collected  in  the 
same  manner  as  taxes  are  assessed  and  collected:  Provided,  however,  That  no 
penalty  shall  be  assessed  under  this  subdivision  for  any  offense  for  which  a 
penalty  may  be  assessed  under  authority  of  section  3176  of  the  Revised 
Statutes,  as  amended,  or  of  section  605  or6  20  of  this  Act,  or  for  any  offense 
for  which  a  penalty  has  been  recovered  under  section  3256  of  the  Revised 
Statutes. 

(d)  The  term  "person"  as  used  in  this  section  includes  an  officer  or  em- 
ployee of  a  corporation  or  a  member  or  employee  of  a  partnership,  who  as 
such  officer,  employee,  or  member  is  under  a  duty  to  perform  the  Act  in 
respect  of  which  the  violation  occurs. 

AUTHORITY   FOR   REGULATIONS. 

Sec  1309.  That  the  Commissioner,  with  the  approval  of  the  Secretary, 
is  hereby  authorized  to  make  all  needful  rules  and  regulation*  for  the  enforce- 
ment of  the  provisions  of  this  Act. 

Art.  33.  Promulgation  of  Regulations. — In  pursuance  of  the  statute 
the  foregoing  regulations  are  hereby  made  and  promulgated,  and 
all  rulings  inconsistent  herewith  are  hereby  revoked. 

Daniel  C.  Roper, 
Commissioner  of  Internal  Revenue. 
Approved  September  6,  1919. 

Carter  Glass, 

■Secretary  erf  the  Treasury. 

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